Top lawyer: Ian Cameron's investment fund was not tax avoidance

Posted On: 
7th April 2016

Graham Aaronson QC, a partner of commercial and tax litigation firm Joseph Hage Aaronson LLP offers his expert opinion on the Cameron family's Blairmore Holdings fund which was administered in the Bahamas until it was relocated to Ireland in 2012.

From what I have read today and yesterday in the press I understand that Blairmore was a collective investment fund set up in the 1980s and administered in the Bahamas until its administration was relocated in Ireland in 2012.

Collective investment funds, whether technically called unit trusts or investment trusts, were very commonly administered from financial centres in the dollar area, such as The Bahamas or Bermuda, if their purpose was to invest in a portfolio of investments which were primarily in the dollar area (such as shares and bonds in US quoted companies). This was completely normal, and scores if not hundreds of such collective investment funds, managed in such locations, were listed daily in the Financial Times (as many still are today, covering 3 pages of today’s edition).

Likewise, moving the location of the administration to Ireland in 2012 would have been perfectly normal, to come within the terms of EU regulations. Again, you can see from today’s FT that dozens of such collective funds are now administered from Ireland.

Investors in such funds would very often include UK residents, and these UK residents would have been obliged (i) to declare in their UK income tax return all income distributed to them from the funds, and also (ii) to declare all capital gains made from selling their units in the funds.

The funds themselves would usually register with HMRC to confirm annually that they did in fact distribute virtually all of their income to the unit holders.

This was a perfectly normal type of collective investment fund, and it would be quite wrong to describe the establishment of such funds as “tax avoidance’’. It would likewise be quite wrong to describe UK residents who invested in such funds as indulging in "tax avoidance" (assuming of course that the UK resident investors complied fully with their obligations to report in their UK tax returns all their income and gains derived from those investments). And I might add that it would be utterly ridiculous to suggest that establishing or investing in such funds would involve abusive tax avoidance of the sort targeted in the GAAR (General Anti Abuse Rule) that I and my study group of experts recommended to the Coalition Government, and which became part of our tax code in 2013.

* Graham Aaronson QC is a founding partner of commercial and tax litigation firm Joseph Hage Aaronson LLP. He is former chairman of both the Revenue Bar Association and the Tax Law Review Committee